White Monopoly Capital: astute reverse double somersault or a Janus performance?

Is the presidential acknowledgement of entrepreneurs as heroes and not villains the equivalent of Pope John Paul II’s admission that the church was wrong to condemn Galileo for endorsing a helio-centric view? If so, it is one of the most astute political reverse double summersaults. As deputy-president Mr. Ramaphosa himself sung heartily the “Down with White Monopoly Capital” song in the Zuma choir.

Janus Ramaphosa

Does the comment during the dinner of the Investment Summit really signal the dawn of economic freedom or was it merely a modern manifestation of Janus? Will the future reveal a Ramaphosa butterfly that was an ugly caterpillar under Zuma or is the two-mouths-two-messages the real reality?

The first requirement to assess future options is a proper understanding of the present. Let us explore that by assessing the ANC Government’s (and Ramaphosa’s) views on SMEs:  does it indicate an embrace of private initiative or something else?

Continue reading “White Monopoly Capital: astute reverse double somersault or a Janus performance?”

Economic freedom globally up but SA tumbles down

ECONOMIC FREEDOM in South Africa deteriorates rapidly. The country has tumbled 12 places and is now firmly embedded in the bottom half of the 162 countries and territories evaluated in the Economic Freedom of the World: 2018 Annual Report. This report by the Fraser Institute confirmed SA’s decline from position 82 to 94 due to anti-freedom policies and practices.

In 2003 SA almost made it into the most-free quartile ranking gaining position 45.  Now the country is a 3rd quartile fixture, being three consecutive years in the bottom half.

The Economic Freedom of the World Report  is the world’s premier measurement of economic freedom, evaluating and ranking countries in five areas: size of government, legal structure and security of property rights, access to sound money, freedom to trade internationally and regulation of credit, labour and business. (See full report).

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Are our enterprise policies shaped by obsessions? Paradigm paralysis (2)

Ramaphosa’s Manifesto – “A New Deal” – envisages the “massifying” of black enterprises to promote growth and job creation. It is shaped – like the National Development Plan – by the paradigm of SMEs as prime agents for growth and jobs. As the belief in the curative effects of bloodletting – it was the general consensus – acted as a barrier that prevented the consideration of alternative treatments, the belief in SMEs obscures evidence that net job creation is largely independent of firm size.

Convictions, one must remember, do not necessarily yield to evidence.

Masaai Mara crossing

For the creation of several hundred thousand successful businesses (or would “massifying” – Ramaphosa’s term – imply businesses by the million?) there needs to be at least a similar number of entrepreneurs with effective business skills and plans for these businesses to have a chance of survival.

But for a business to succeed one needs other ingredients than mere entrepreneurial aptitude and astute management: it requires support from customers and clients. Successful “massifying” of new businesses would therefore depend on a prior (or at least simultaneous) mushrooming of the spending power of existing consumers and/or the “massifying” of consumers.

On that, the New Deal is silent… Could a 2016 warning about economic transformation hold the explanation?

Continue reading “Are our enterprise policies shaped by obsessions? Paradigm paralysis (2)”

A Cyril Swallow does not make a Summer of Growth: How business friendly is Ramaphosa’s New Deal?

We need to massify the creation, funding and development of black-owned small businesses, township businesses and co-operatives.” Cyril Ramaphosa’s New Deal for South Africa (14 Nov 2017).

This quote from Ramaphosa’s 10 point plan manifesto to get the economy growing forms part of the action steps under Point 5: “we must accelerate the transfer of ownership and control of the economy to black South Africans.

At first take the creation of an immense number of enterprises sounds like a pro-business approach. But is this objective realistic? Will it render the desired outcome? Even more basic: is it sound economics?

The New Deal is silent on how this enterprise factory that will mass-produce black-owned businesses would work. Whilst the manifesto was announced in the context of the ANC leadership contest, the “we” that Ramaphosa refers to is clearly Government and its administrative institutions. Continue reading “A Cyril Swallow does not make a Summer of Growth: How business friendly is Ramaphosa’s New Deal?”